In the latest edition of its Global Economic Prospects, the World Bank has slashed India’s GDP prospect from 8 per cent projected earlier.
This is the second time that the World Bank has revised its GDP growth forecast for India in the current fiscal 2022-23 (April 2022 to March 2023). In April, it had trimmed the forecast from 8.7 per cent to 8 per cent and now it is projected at 7.5 per cent.
“In India, growth slowed in the first half of 2022 as activity was disrupted both by a surge in Covid-19 cases, accompanied by more-targeted mobility restrictions, and by the war in Ukraine,” the report said.
It further added that economic recovery in India is facing headwinds from rising inflation, supply chain disruptions, and geopolitical tensions have offset buoyancy in the recovery of services consumption from the pandemic.
In addition, the report added that unemployment rate has declined to levels seen prior to the pandemic, but the labor force participation rate remains below pre-pandemic
levels and workers have shifted to lower-paying and less secure jobs.
“Growth is expected to slow further to 7.1 percent in 2023-24 back towards its longer-run potential,” it noted.
The World Bank also said that growth be supported by fixed investment undertaken by the private sector and by the government, which has introduced incentives and reforms to improve the business climate.
This forecast reflects a 1.2 percentage point downward revision of growth from the January projection, the bank added.
Besides, World Bank report also slashed its growth estimate for the global economy to 2.9 per cent, 1.2 percentage points below the January forecast, due to the Russian invasion of Ukraine which has caused a severe downturn.
“The world economy is expected to experience its sharpest deceleration following an initial recovery from global recession in more than 80 years,” the bank said Tuesday in its Global Economic Prospects report.
The slump comes after growth recovered to 5.7 per cent in 2021 following the downturn caused by the Covid-19 pandemic.
(With inputs from agencies)